The ATO’s 2016–17 taxation statistics, released late last month, showed that those with the occupation category of chief executive or managing director, general manager or director were more inclined to negatively gear, with 70,985 doing so.

“Two-thirds of those who negative gear have a taxable income of less than $80,000 and over 70 per cent of those who negatively gear have only one property.”

Housing market will not collapse

The Tax Institute’s senior tax counsel, Professor Robert Deutsch, believes that while Labor’s policy will have an impact on the property market, it will not cause a collapse.

“Certainly, the housing market will be dented by Labor’s proposals to restrict negative gearing benefits to newly constructed housing and to halve the CGT discount,” Professor Deutsch said.

“The housing market will survive even if Labor manages to get both measures through the Senate, which is questionable.”

While Labor has confirmed that the proposal will go beyond property investments and apply across all investments, Professor Deutsch still believes the proposal raises several questions, including whether it will apply on an asset-by-asset basis or on a global-per-taxpayer basis.

“If a taxpayer has an excess of interest over rent, what will he/she/it be able to do with the excess? Carry forward to later years to offset against future positive investment income (a fair result) versus bury the excess in the cost base for CGT proposes (an unfair result)?” he added.